Reforms to Ireland State Pension Pushed Back to 2021
Throughout 2020, the Minister for Employment Affairs and Social Protection of Ireland has stated that the highly anticipated reform to Ireland’s State Pension has been pushed back to not begin until 2021. There have been many roadblocks and hurdles that have slowed down this process from even being presented in Cabinet. The primary reason for amending this state pension function is to create the introduction of a total contribution approach, while also adapting the state pension eligibility.
Presently, contributions to the state pension plan are made based on an average of the full working lifespan. However, this can create a moderate disadvantage for some people who do not work the entire time that they are in the working age bracket. This population of disadvantaged workers can include women who take time off to have children or any workers who take time off to care for family or for any other reason. Based on the newly proposed legislations, workers will be eligible to receive higher pension payments based on the new methods of calculating these criteria.
The newly proposed state pension plan will also be a mandatory contribution plan all workers must pay into. This will encourage more individuals to actually save for and plan adequately for their retirement. This newly proposed plan will also be created with an auto-enrollment function which will hopefully reduce any reluctance towards contributing to the plan. Most OECD (Organization for Economic Co-operation and Development) countries have already employed the use of auto enrollment schemes when planning for retirement and pension plans. The creation of an auto enrollment scheme will be fundamental in the potential success of this proposed new state pension plan. Less than half of the working population in Ireland actually has a workplace or private pension. Therefore, by auto-enrolling all workers, and creating a program that has mandatory participation, the country will be increasing efforts to mitigate the risk of workers who are not financially prepared for their retirement years.
Most workers understand the need to save for retirement – many of them just don’t know where to begin or how to actually save. The creation of a mandatory state pension plan will help workers prepare more thoroughly for their future, and hopefully reduce the need for other government assistance programs.
While the automatic enrollment scheme will likely not be ready for use until the year 2022, the fact that this new plan is on the way may encourage more workers to enroll in the plan at a faster rate. This timeline works in alignment with a phased introduction design for these changes. Resistance can be an issue if too many changes take place all at once. Therefore, not fully implementing this program to its full extent until the year 2022 may be beneficial in increasing the long-term success of this program as a whole.